An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems

52 Pages Posted: 9 May 2011

See all articles by Orley Ashenfelter

Orley Ashenfelter

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Janet Currie

Princeton University; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Henry S. Farber

Princeton University; National Bureau of Economic Research (NBER)

Matthew I. Spiegel

Yale University - Yale School of Management, International Center for Finance

Date Written: August 1990

Abstract

This paper reports the results of a systematic experimental comparison of the effect of alternative arbitration systems on dispute rates. The key to our experimental design is the use of a common underlying distribution of arbitrator "fair" awards in the different arbitration systems. This allows us to compare dispute rates across different arbitration procedures where we hold fixed the amount of objective underlying uncertainty about the arbitration awards.There are three main findings. First, dispute rates are inversely related to the monetary costs of disputes. Dispute rates were much lower in cases where arbitration was not available so that the entire pie was lost in the event of dispute. Second, contrary to conventional wisdom, the dispute rate in a final-offer arbitration system is at least as high as the dispute rate in comparable conventional arbitration system. Third, dispute rates are inversely related to the uncertainty costs of disputes. Dispute rates were lower in conventional arbitration treatments where the variance of the arbitration award was higher and imposed greater costs on risk-averse negotiators. Our results can also be interpreted as providing tentative evidence that the negotiators were risk-averse on average.

Suggested Citation

Ashenfelter, Orley C. and Currie, Janet and Farber, Henry S. and Spiegel, Matthew I., An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems (August 1990). NBER Working Paper No. w3417. Available at SSRN: https://ssrn.com/abstract=1832160

Orley C. Ashenfelter (Contact Author)

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
United States
609-258-4040 (Phone)
609-258-2907 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Janet Currie

Princeton University ( email )

Princeton, NJ 08544-1021
United States
6092587393 (Phone)

HOME PAGE: http://www.princeton.edu/~jcurrie

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Henry S. Farber

Princeton University ( email )

Industrial Relations Section
Firestone Library
Princeton, NJ 08544
United States
609-258-4044 (Phone)
609-258-2907 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Matthew I. Spiegel

Yale University - Yale School of Management, International Center for Finance ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6017 (Phone)
203-432-8931 (Fax)

HOME PAGE: http://som.yale.edu/~spiegel

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